Will the Estate Tax Exemption Ever Be Reduced?

The estate tax exemption, currently $5.34 Million for each individual in
2014, is in the cross-hairs again for possible reduction. Under President
Obama's proposed 2015 budget (called the "Green Book"),
the following changes would be made to the estate tax exemption by 2018:

Doing away with "Dynasty Trusts", currently available in Alaska,
Delaware, South Dakota, and Wisconsin

Intentionally Defective Grantor Trusts

Because these changes are set to occur in 2018 after Obama's term ends,
it is unclear whether they will actually take place. What we do know is
that reducing the estate tax exemption and tax loopholes for "the
rich" will always be on the targeted list.

In truth, the estate tax impacts very few people and collects a miniscule
amount of revenue for the US government. Consider these statistics from the IRS:

73,100 estate tax returns were filed in 2003; in 9400 were filed in 2012

In 2011, the government collected 117 times more income tax than estate tax.

Only 0.38% of the 2.5 million people that died in the US in 2012 filed
an estate tax return.

Despite its annual inclusion on Obama's list, the risk of an estate
tax exemption reduction has been significantly reduced since the exemption
amount was tied to inflation in 2012. Prior to 2012, Congress had to affirmatively
vote to extend the exemption; now they must affirmatively vote to stop it.

For our clients, we usually recommend Wills with tax planning strategies
for estates starting in the $3-5MM range. We plan for the worst and hope
for the best. We also know that if it is on Obama's target list, it
must be a great opportunity for taxpayers.

The information on this website is for general information purposes only.
Nothing on this site should be taken as legal advice for any individual
case or situation. This information is not intended to create, and receipt
or viewing does not constitute, an attorney-client relationship. Dossey & Jones PLLC is not an accounting or CPA firm.

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